Alice Munro and David Malouf head the longlist for the world's richest prize for a collection of short stories, the Frank O'Connor award, announced earlier today.

The 34 names in the running for the €35,000 (£24,000) prize include nine writers from America, six from Britain and Ireland, five from Australia, two from Canada as well as one each from New Zealand, Bulgaria, Iceland, Montserrat, Israel and Kenya.

Small presses are well represented, with entries from Tindal Street Press, Salt Publishing, Algonquin Books and Arlen House alongside nominations from larger publishers such as Jonathan Cape and Chatto & Windus.

The smaller houses figure prominently on the list because of the reluctance of large publishers to invest in the short story, according to one of the directors of Salt Publishing, Jen Hamilton-Emery.

"The only short stories [the big houses] publish are by big name novelists," she said, "which is great for us, because we can publish them."

"A lot of authors write short stories - it's often their first love - but they have to write novels to be taken seriously," a necessity which according to Hamilton-Emery can lead to a decline in the quality of their work.

"The whole book-world ignores short stories: it's very hard to get them reviewed and bookshops don't stock them. This prize is one of the very few prizes they're eligible for."

However Chatto's four entries assemble an impressive roster of international talent. Heavyweights Alice Munro and David Malouf are nominated for The View from Castle Rock and Every Move You Make. Etgar Keret - picked for his third collection of short stories published in English, Missing Kissinger - has long been hailed as the voice of young Israelis, and Karen Russell is nominated for her debut, St Lucy's Home for Girls Raised by Wolves, a collection skilful enough to earn her a place on Granta's list of the best young American novelists even before completing her first novel.

Charlotte Grimshaw, a writer who in 2003 appeared on a similar list inspired by Granta of young novelists from New Zealand, is nominated for Opportunity. Tessa Hadley, a British writer who appeared on the longlist for the 2002 Guardian First Book Award, is nominated for her first collection of short stories, Sunstroke.

The five other British writers on the list, each one nominated like Hadley for their first collection of short stories, are Simon Robson with The Separate Heart, Jay Merill for Astral Bodies, Chrissie Gittins for Family Connections, John Saul - not to be confused with the American thriller writer of the same name - for Call it Tender and Toni Davidson for The Gradual Gathering of Lust.

The award is open to books published in English anywhere in the world for the first time between October 2006 and September 2007. Translators of winning collections split the prize equally with the original author, though with only Etgar Keret and Bulgarian writer Gerogi Gospodinov writing in a language other than English a split award is extremely unlikely. Longlisted authors originally from outside Europe and America include Icelander Olaf Olafsson and Kenyan Ken N Kamoche. EA Markham, born in Montserrat in 1939, has been mostly resident in the UK since 1956.

The judges for the third Frank O'Connor prize are US writer Rick Moody, Nigerian author Segun Afolabi and the Irish writer Nuala Ni Chonchuir.

Asian writers triumphed in the first two years of the annual award, with the inaugural prize being awarded to Yiyun Li for her debut collection, A Thousand Years of Good Prayers. Last year's winner was Haruki Murakami for Blind Woman, Sleeping Willow. No space was found on this year's longlist for writers from Asia or South America.

The shortlist will be announced in July, and the winner declared at Cork's Frank O'Connor International Short Story Festival in September.